German management fees vary widely – survey

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GERMANY - The fees asked for active management in Germany can vary by over 800%, according to a survey by GSC-PPCmetrics Investment Consulting AG.

In the second quarter of 2004, Wiesbaden-based GSC-PPCmetrics polled 46 companies with over 300 billion euros in assets under management - about 64% of the German market for special funds.

The survey comprises management fees for actively managed products, fees for passively managed products as well as for alternative investments such as total, absolute return and hedge funds.

While fees for active management can vary dramatically, fees for passively managed products are lower and vary less said the consultant in a 90-page study.

"Compared to the market for actively managed products, there are substantially fewer managers who offer passive management services. The same goes for alternative investments," the report says.

Data on administration of MasterKAG funds, for big institutional investors with several “spezialfonds" managed by different managers, was also provided.

Eleven of the 14 active MasterKAGs administering 77% of all special funds took part in the survey, revealing that fees for the administration of Masterfund-mandates also "varies considerably" – by up to 600%.

"However, these fees are not easily comparable since the range of services offered by the MasterKAGs differs substantially. In addition, investors are facing very different compensation models, e.g. absolute fee versus rates in basis points," the firm added.

The survey reveals that absolute level of management fees for these products asked for by non-German managers remains above the compensation level of their German counterparts.

German managers are, however, raising their fees while the fee structure of non-German managers mostly remained unchanged, making the average compensation for the active management of special funds rise "somewhat."